Bookkeeping: Taking More Profits Out of Kendle International (KNDL)

This Kendle International (KNDL) trade has worked out as best as we could hope for. We bought Friday around $18, took 1/3rd of the position off Monday on the 17% move up around $21 and today we have another 20%+ move and a print near $26 so I'm going to effectively "close" the position (we keep 0.1% stake). So we made about 45% in 3 sessions on the other 2/3rds of the position we are letting go now. Kendle demolished earnings estimates (and raised guidance) - as I said last week - it was hit as hard as a company in the sector that missed estimates - guilty until proven innocent in this market. It is nice to finally nail a trade - we'd like to actually be buy and "holders" but not in this market.


I am adding to Life Sciences Research (LSR) offset some of my sales in Kendle - they reported earnings this week so there is no near term catalyst for the name but the market did not react kindly to earnings which I thought were fine. So this is more of a value trade - and we can do an allocation adjustment here (same sector) and trade out of the one the market is happy with (and has a big gain) and roll that money into an even cheaper version of a similar company the market is ignoring. LSR is smaller and more illiquid than Kendle - again not expecting anything exciting in the near term but at 10x earnings it's among the cheapest in the sector.

Full report for Kendle here.

• Shares of Kendle International Inc. jumped Wednesday after the provider of clinical research services reported a higher third-quarter profit and raised its full-year profit guidance. Late Tuesday, the company said it earned just under $11 million, or 73 cents per share, up from profit of $3.8 million, or 25 cents per share, in the third quarter of last year. Revenue rose 27 percent to $181.1 million from $142.4 million. Service revenue rose 25 percent during the quarter to $124.8 million. Reimbursements comprised the rest of the revenue.
• Analysts polled by Thomson Reuters expected profit of 56 cents per share on service revenue of $125.9 million.
• Kendle said new business awards for the quarter rose 21 percent to $212 million.
• The company expects full-year profit between $2.10 and $2.25 per share on service revenue between $485 million and $500 million. Previously, the company expected profit between $2 and $2.15 per share on revenue between $490 million to $500 million. Analysts expect 2008 profit of $2.04 per share on revenue of $493.4 million.
• "Over the past few years, management has focused on increasing Kendle's geographic reach, service breadth and depth, and therapeutic expertise," wrote Robert W. Baird analyst Eric Coldwell in a note to investors. "As a result, Kendle is now truly a global player, as evidenced by strong business development performance and increased capture of large late-stage global trials." He reaffirmed a "Outperform" rating, saying demand for clinical research services remains exceptional.

Long Kendle International, Life Sciences Research in fund; no personal position